What is 'Speculative Risk'
Speculative risk is a category of risk that, when undertaken, results in an uncertain degree of gain or loss. All speculative risks are made as conscious choices and are not just a result of uncontrollable circumstances. With a speculative risk, there is some chance of either a gain or a loss. Therefore, speculative risk is the opposite of pure risk, which is the possibility of only a loss and no possible gain.
Almost all investment activities involve some speculative risks, as an investor has no idea whether an investment will be a blazing success or an utter failure. Some assets carry a combination of speculative and hedgeable risk, such as an options contract. If you buy a call option, you know in advance that your maximum downside risk is the loss of the premium paid if the options contract expires worthless. At the same time, you do not know what your potential upside gain will be, since nobody can know the future.